With the Covid-19 declared as a "Pandemic" by the World Health Organization (WHO), there is no denying its adverse effects on all segments of the population including businesses and establishments of all sectors and sizes around the world. With the Government of Bangladesh enforcing lockdowns and social distancing, in an attempt to curtail the spread of the virus, businesses across the country are already feeling the financial crunch. The government first announced a 10-day lockdown from March 25 until April 04, which has now rolled on to become more than a month-long shutdown, with the ongoing extension declared to continue until May 15.
As businesses struggle to stay afloat amidst the global crisis during the period of 'general holidays' or lockdown, they are sustaining losses and facing steep declines in revenues. Leaders in all sectors are being forced to rethink a broad range of interconnected issues, including, shoring up liquidity, reorganizing business plans, and navigating complex operational challenges. This unprecedented disruption has made businesses vulnerable, with many employees and workers getting the short end of the stick, facing lay-offs, retrenchment and terminations. While many employers are also implementing salary reductions and restructuring.
With Eid-ul-Fitr fast approaching, this article aims to address the burning question - whether employers should pay the festival bonus amidst this crisis, while employers genuinely struggle to merely pay the monthly salaries of their employees, specifically in the labour-intensive industries.
For private sectors, the applicable law for festival bonus is enshrined under the Labour Rules, 2015 (the "Rules"). The Rules are applicable for 'workers' as defined under Section 2(65) of Labour Act 2006 (the "Act") and excludes the non-worker category of employees. These non-workers are however guided through individual contracts which in general practice are not less favourable than the provisions made under the Act.
Section 111(5) of the Rules makes it obligatory for employers to pay two festival bonuses in a year, which must be given to employees who have completed at least a year of service in the establishment. This is a mandatory requirement with no room for discretion on the part of employers.
It should be noted, however, that the law does not factor in the current pandemic, and there is scope for significant government intervention in regard to the payment of bonuses at a time when many employers are not even in a position to pay full wages on time. With the rapidly changing economic circumstances due to the pandemic, although the government is announcing a range of financial measures, guidance and advice, it seems they are not coming fast enough. Therefore, in the absence of any clear direction by the government on this matter of festival (Eid) bonuses to date, upon subjective self-evaluation of the liquidity of each organization, they may consider the following alternatives in dealing with festival bonuses:
REDUCTION: The Rules clearly state that each festival bonus shall not be more than the basic wage amount, hence the Rules sets the maximum ceiling of each bonus, and does not explicitly stipulate any minimum amount. Therefore, employers can consider payment of bonus at a reasonably reduced proportion, and still be in compliance with the law. Although the Rules leave scope for employers to exercise their discretion in adjusting or reducing the sum of festival allowance, it is subject to any employment contract not being contrary to the same.
Therefore, any employment contract which particularly mentions the amount of festival bonus to be received by employees must be varied, so that reduction does not result in a breach of the contract on the part of employers.
DEFERRAL: Instead of reduction, employers may consider deferral of the festival bonuses with the promise to pay those bonuses in the future, should the employees agree. An employer exploring this option may simply defer the bonus allowance until the period of COVID-19 or until the business returns to normal.
WAIVER: Businesses which have been hit the hardest, facing liquidity crisis, and are barely surviving may in consultation with the employees also seek complete waiver of the festival bonuses. However, this option must be carefully considered as festival bonuses are legal rights of workers and they undoubtedly count on the same especially at the time of such festivities. Therefore, such arrangements should be taken subject to consent and mutual agreements with the employees. This alternative must only be exercised as a last resort keeping in mind that this may amount to a breach of the law in case of dispute.
WHAT TO DO: Therefore, until there is a clear guidance from the government in regard to disbursement of festival bonuses, it is emphasised that any of the three alternatives chosen by the employer must be done in consultation with the employees, collective bargaining agents (if any) and trade unions (if any) and with their express consent, ideally recorded in writing in order to minimise the prospect of any future dispute.
Where relevant, government agencies, such as DIFE and Department of Labour, dealing with the rights and welfare of workers, must be kept informed at all times about the decisions of the employers, including the employers being prepared with documentation indicating the reasons for such recourse. The employers should also seek guidance from such government agencies and work in a cooperative manner with them in order to reach a workable solution that is beneficial to both the employers and employees.
The writers are Associates at The Legal Circle, a corporate law firm.
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